EPZ plants allowed to get bank loans from abroad

The Prime Minister’s Office (PMO) has already instructed the authorities concerned to allow such type of loan facilities being sought by the EPZ establishments.

Entrepreneurs have welcomed the government decision saying this will help get low-interest foreign financing.

But they are also cautious that such type of loan facilities might be risky in the wake of volatility in exchange rates and high inflationary pressures.

The PMO said the EPZ factories did not get foreign sources of financing so far due to complexities in the existing laws.

It, however, said the committee formed in this connection at the Finance Division and the Bangladesh Bank (BB) will recommend for foreign loan for an interim period as the Guideline for Foreign Exchange Transaction-2009 does allow such type of credits.

The BEPZA will receive initial applications and forward those to the BB for its necessary approval. The BB will give its approval following recommendations from the committee.

It said a representative from the Bangladesh Export Processing Zones Authority (BEPZA) should be co-opted for efficient functioning of the committee.

The PMO office said the Guideline for Foreign Exchange Transaction-2009 should be amended to pave the way for permanent loan facilities for the EPZ factories.

It also said a new chapter should be added to the existing guideline to avail such type of loans permanently.

The PMO office letter, which is available with the FE, said the BEPZA will finally issue no-objection certificates for foreign loans after necessary approval from the BB and the committee formed at the Finance Division.

Sources at the Board of Investment (BoI) said they earlier took many initiatives for foreign loans for the EPZ factories. But they had stopped such moves as the Act and laws concerned did not allow such type of loans.

Ashraful Hassan, managing director at the Grameen Knitwear at the Dhaka EPZ told the FE that the government decision allowing foreign financing is right.

“I see all positives,” said Mr Hassan whose factory had faced a devastating fire incident in 2011.

Mr. Hassan, however, said volatility in foreign exchange might pose a threat for such type of financing.

“If local currency depreciates against the US dollar, then the real rate of interest will shoot up,” he pointed out.

Another official at the Daewoo Bangladesh, a spinning mill at the DEPZ, said the decision is good as many industrial units will now avail cheap loan facility called off-shore banking.

An off-shore bank is usually located outside the country of residence of the depositors and organisations that avail loan facilities.

However, the PMO took the decision in the light of an earlier meeting in this connection on December 30 last. It was presided over by Director-General of the PMO Mr. Abdul Aziz.

The PMO sent its order on January 20 last asking the authorities to allow the facility for an interim period. It issued letters to the BB and the Finance Division and the BoI to take necessary steps for such loan facilities.

Bangladesh has now eight EPZs with the first one being in Chittagong beginning its operation in 1983.

Factories in the EPZs so far invested nearly US$ 3.0 billion since 1983. They have employed 381,000 people.